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Insightful HR Initiatives: From Cost Center to Profit Generator

By Subir Verma, Head - Business HR (Generation), Tata Power, Mumbai

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Subir Verma, Head - Business HR (Generation), Tata Power, Mumbai

Tata Power is India’s largest integrated power company and together with its subsidiaries and jointly controlled entities has an installed capacity of 10857 MW. A pioneer in the field, it has a presence across the entire power value chain; providing services related to generation of renewable as well as conventional power including hydro and thermal energy, transmission and distribution, trading, coal and freight logistics.

It is interesting to compare the list of Fortune 500 companies of 2014 and 1955; only 61 companies appear on both the list. This means 88 percent of the companies have either merged, gone bankrupt or fallen significantly. It can also be perceived that constant turnover in Fortune 500 companies is good as it reflects the dynamism, innovation, business execution and excellence displayed by the new companies.

In a mainly competitive and global environment, technological change, responsiveness, technological update, and path-breaking innovation have to be the core competency of any organization, which also separate the winners from the losers. Managing these is a difficult process, but indeed essential for all functions including HR.

Time has come when most of the HR professionals need to move from generic models of HR and ‘best’ practices syndrome to an organization based on customized people practices and business programs. These programs directly impact the top line and the bottom line of the company to drive excellence and command respect for the function.

"HR must transition from an HR partner (a cost center) to part of the business (a profit center) mode"

HR must transition from an HR partner (a cost center) to part of the business (a profit center) mode. HR professionals should not pay much attention to the advice of becoming a good business partner, aligned with the business but focus on innovation, creating and contributing through a new business model, maybe in a small way to start with.

Besides core HR activities, here are two other categories of thoughts to improve top-line and impact the bottom line, which can help HR gain more perceived important by driving business excellence and direct growth of the company,
1. Create impact with HR initiatives
2. Create impact with beyond HR initiatives

1. Create Impact With HR Initiatives
a. Productivity Improvement - E veryone k nows t hat a good salesperson revenue generation will be more than an average salesperson. HR must analyze the current sales hiring process, re-engineer them so that it measurably identifies and hires better salespeople, which can be exhibited with data and trends. If the newly hired salesperson whose revenue generation is more than 10 percent, you could (with a little blessing from CFO and Sales Head), publicly state that HR played role in impacting the top line.
b. Make Customized Solutions – Emulating the best practices is not enough; customized practices suiting the business need must be made. For small / growing or start-up, having a bench strength is not possible. Here, HR needs to work along with business from the proposal submission stage and track progress (probability of getting business by sales team) and make a plan to acquire talent based on that probability. Some organization has successfully managed to achieve what can be called as ‘Just in Time’ hiring, ‘Probability based hiring’ and stop revenue loss due to non-availability billable resources or hiring before winning the project.

c. Prioritize Revenue-Generating Business Units, Jobs, and Employees - Revenue generating people/ role and non-revenue generating people/role must be tracked and prioritized differently for the purpose of hiring, attrition, engagement and many more. Everyone knows that highly engaged employees generate high revenue. But, it must track and ensure high engagement for revenue-generating and customer engagement roles specifically.

d. Implement Customized Reward and Recognition Program - While organization level R&R is good and must continue, some organizations have worked with the CEO and CXO to implement performance management by developing a process and metrics that accurately assess an individual impact on key organization parameters like revenue, sales, customer, partner, cost, delivery timeline and many more. A carpet-bombing approach is not as effective as a customized and personalized reward and recognition. Appreciation to and for people (including family members) who made the employee do well will be more effective in making the employee feel valued.

e. Similar Focus on Outsourced Workers and Partners - At least in manufacturing and service-based organization the number of outsourced workers is many times the number of the permanent workforce. Yet, generally, very little focus and attention have been given to them for productivity, effectiveness and excellence enhancement. They are and will be an integral part of the business; hence they must be made part of all such initiative and ecosystem to improve organizational excellence.

2. Create Impact With Beyond HR Initiatives
a. Generate Direct Revenue - It can be thought to offer HR services to external clients as well (at least in a similar sector) to generate direct revenue. Companies like Disney, Southwest, and Wachovia have generated revenue by offering HR services externally. By using this strategy, the business would retain the revenue made from these external services, while also making the company more visible in the community.

b. HR Should Act As Revenue Enhancer - Sales a nd business development are no longer restricted to the sales team. Like many CEOs prefer to have business people in an HR role, HR too, should influence or at least provide lead/support for new client generation. HR by virtue of its role is well connected and passing the sales leads may convert into revenue generation for the company. It may be a good idea to have a nominal sales target for the HR team too!

c. Convert Employee Innovation/Idea Into Revenue By Promoting Entrepreneurship – Some companies have started innovation practice, incubating the right idea to promote within company entrepreneurship. Creating new products/services should be promoted so that in the future, these initiatives can become new revenue generation stream for the company to fuel future growth.

HR function at Google is effectively using operationalizing a business-impact strategic approach. HR leaders at Google consistently use metrics and mathematical algorithms to scientifically improve business performance and excellence from programs like hiring, retention, and leadership. Such an algorithm can generate data like revenue impact of people management offerings for each HR initiatives such as free food, workspace design, and collaboration practices. This helps in focusing on HR activities which have the highest impact on revenue.

Gartner CEO and the senior business executive survey found that growth remains a top priority of most of the CEOs and technology-related change is viewed as the primary tool to achieve growth in 2020. High profit always has two elements, improving top-line and reducing bottom, which is also the top agenda of any CEO. Marketing, Sales, Supply chain and Finance have become corporate heroes because they have demonstrated that they have a direct and measurable impact on both or one of his critical strategic goals.

Now is the time for HR to demonstrate and prove before more experts start questioning value added by HR in a company!!

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